Bush: Freeze domestic spending to pay for war

President Bush’s 2009 budget will virtually freeze most domestic programs and seek nearly $200 billion in savings from federal health care programs, a senior administration official said Thursday.

Overall, the Bush budget will exceed $3 trillion, this official said. The deficit is expected to reach about $400 billion for this year and next.

Bush on Monday will present his proposed budget for the new fiscal year to Congress, where it’s unlikely to gain much traction in the midst of a presidential campaign. The president has promised a plan that would erase the budget deficit by 2012 if his policies are followed.

To that end, Bush will propose nearly $178 billion in savings from Medicare over five years_ nearly triple what he proposed last year. Much of the savings would come from freezing reimbursement rates for most health care providers for three years. An additional $17 billion would come from the Medicaid program, the state-federal partnership that provides health coverage to the poor.

The budget for most domestic programs funded by Congress will look similar to last year’s, according to the official, from the Office of Management and Budget.

“It’s a very small increase,” he said. “Very small.”

A second administration official said domestic discretionary spending would increase by less than 1 percent under Bush’s proposal.

Both officials spoke on condition of anonymity because the budget has not yet been released

In his State of the Union address Monday, Bush said his budget envisioned a surplus in 2012. “American families have to balance their budgets, and so should their government,” he said.

The federal government is expected to spend about $650 billion on Medicare and Medicaid in 2008. It represents more than $1 out of every $5 spent by the federal government.

The OMB official said the president views the budget as a final opportunity to slow the growth of entitlement programs but recognizes that Congress probably won’t go along.

He said spending on Medicare would increase under Bush’s new budget, but not as quickly as had been expected. “Medicare will grow at 5 percent. It just won’t grow over 7 percent,” he said.

Savings also would come by charging wealthier people higher monthly premiums for Medicare’s drug program.

The Centers for Medicare and Medicaid Services said the Bush budget would project the 10-year cost of the program, from 2008 to 2017, at $915 billion. That’s $117 billion less than what had been forecast last summer. The agency attributed the lower estimate to smaller increases in the cost of medicines, and better deals negotiated between insurers and drug manufacturers.

The agency said 25.4 million people were now enrolled in a Medicare drug plan.

Bush last year asked Congress for nearly $65 billion in Medicare savings over five years. Congress refused to go along.

Independent experts have warned that the government needs to address the rising cost of health care for businesses to stay competitive and for the government to be able to pay for other important programs in the decades ahead.

“In fact, if there is one thing that could bankrupt America, it’s runaway health care costs. We must not allow that to happen,” David M. Walker, the U.S. comptroller general, told lawmakers Tuesday during a congressional hearing.

But Democrats said Bush’s budget targets the wrong health care providers for cuts. They said insurers subsidized to provide Medicare coverage are being overpaid.

“The president is proposing to once again slash health care coverage for seniors and low-income working Americans,” House Speaker Nancy Pelosi, D-Calif., said. “The president’s cuts are exactly the wrong medicine when the cost of health care and the number of uninsured continue to rise and families are feeling economically insecure.”

Health care providers said the president’s recommendations would make it harder for them to meet expenses, which would continue to rise as a result of inflation, even as their reimbursement rates were frozen.

“That level of reduction is so outrageous that it will be summarily rejected by members of both parties in Congress,” said Tom Nickels, senior vice president of federal relations for the American Hospital Association. “I don’t think it will be taken seriously.”